We construct a general equilibrium model of urban unemployment with a continuum of heterogeneous urban firms producing differentiated products in a monopolistic competitive market. We show that an increase in urban institutionally fixed minimum wage reduces urban aggregate output and each urban firm will experience an output cut proportional to the change in aggregate output. However, such prop...

This paper develops a model of endogenous product selection by firms. The theory is motivated by new evidence we present on the importance of product switching by U.S. manufacturers. Two-thirds of continuing firms change their product mix every five years, and product switches involve more than 40% of firm output and almost half of existing products. The theoretical model incorporates heterogen...

We show that heterogeneous firms choose different locations in respond to market integration. Specifically, decreasing trade costs lead to the gradual agglomeration of efficient firms in the larger country where they have access to a bigger pool of consumers. In contrast, high-cost firms seek protection against competition from efficient firms by locating in the smaller country. However, when t...